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San Francisco will become the first US city to enact a mandatory fully paid parental leave for employees, and California will increase its statewide minimum wage to $15.00 per hour.

San Francisco Paid Parental Leave Ordinance

On April 5, the San Francisco Board of Legislators agreed unanimously to require that San Francisco employers provide their employees with six weeks of fully paid parental leave. San Francisco is now the first US city to have mandatory fully paid parental leave. The ordinance will go into effect on January 1, 2017 for certain employers.

Under current California state law, employees may receive up to 55% of their wages through state disability for six weeks of parental leave. With this new ordinance, in San Francisco, employers will be required to cover the difference (45%) so that employees who are new parents can receive full payment for six weeks of leave time.

The ordinance passed an initial vote on April 5, and will be subject to a largely procedural second vote next week. Representatives from San Francisco Mayor Ed Lee’s office have stated that he intends to sign the ordinance.

Who Is Affected?

When the ordinance goes into effect in January 2017, employers with 50 or more employees who work within the City of San Francisco will be required to provide the required leave and pay. The ordinance will apply to businesses that employ between 35 and 49 workers starting in July 2017. In January 2018, the ordinance will go into effect for employers with 20 or more employees.

This benefit is applicable only to employees who work at least eight hours a week, and who spend at least 40% of their work week within the San Francisco city limits.

The ordinance does not apply to federal, state, or other municipal governments.

California Statewide Minimum Wage Increase

Following in the footsteps of San Francisco (which voted in late 2014 to raise its minimum wage to $15 per hour by 2018), on April 4, 2016, California Governor Jerry Brown signed into law Senate Bill No. 3, which will increase the minimum wage in California to $15 per hour by 2022 (2023 for companies employing 25 or fewer people).

The increase to $15 per hour will occur incrementally, with a $.50 per hour increase to take effect beginning January 1, 2017 and another increase of $.50 per hour in January 2018. Thereafter, the rate would increase $1 per year until 2022. Once the minimum wage reaches $15, it will be adjusted annually according to inflation rates. While SB 3 provides Governor Brown discretion to suspend increases based on economic conditions, such discretion is expected to be quite limited (e.g., if there is declining state revenues from sales tax and a decline in the labor market or budget deficit).

IMPORTANT NOTE: Because California’s exempt salary basis is tied to minimum wage (two times the monthly minimum wage), this change will also increase how much employers will need to pay exempt employees in California. If the rate increases as proposed, by January 2022, the current annual salary requirement of $41,600 will increase to at least $62,400 for exempt employees.